Obama budget targets oil and gas industry — again (updated)

Copies of last year’s White House budget arrived on Capitol Hill … but were ignored by lawmakers. At least the oil-and-gas provisions. (AP photo)

Another year, another budget blueprint from President Obama, another attempt to increase the taxes paid by the oil and gas industry.

After trying and failing for four consecutive years, the budget to be released this morning by the president includes what senior administration officials describe as “closing of unfair tax loopholes” including “tax loopholes for oil and gas companies.”

At the same time, they disclosed, the president is asking Congress to make permanent the temporary tax breaks for renewable energy, energy efficiency and research and development.

Texas Republicans say the Obama plan is a non-starter.

“This proposal, delivered more than two months late, is not serious and is not a reasonable way to govern,” said Rep. Kenny Marchant, a Republican from Carrollton.

And while the White House declined to provide specifics last night, officials didn’t deny that the energy “loophole closings” would mirror previous proposals.

Although the White House proposal would raise the bulk of revenues by allowing Bush-era tax cuts for the wealthy to expire, it also would bring in another $41 billion over 10 years by eliminating oil and gas tax incentives, including deductions for intangible drilling costs (such as the price of repairs, site preparation and hauling supplies) and for the percentage depletion at oil and natural gas wells.

The Obama administration also would bar oil and gas companies from claiming a domestic manufacturing deduction, which has generally been available to a broad range of U.S. firms. And it would prevent companies from claiming a tax credit on payments to foreign governments — including petroleum income taxes — that they pay in exchange for some economic benefit.

Coal industry tax incentives also would be on the chopping block, as would $150 million in oil and gas research and development programs over the next decade.

The White House plan also would:

Impose a new $4-per-acre, use-it-or-lose-it fee on all new non-producing oil and gas leases on land and offshore, raising an estimated $1 billion over the next decade. The administration has pitched this proposal as a way to spur oil and gas companies “to either get their leases into production or relinquish them so that the tracts can be leased to and developed by new parties.” But the oil industry insists they already have enough incentives to develop leases as quickly as possible.

Reinstate $18.7 billion in Superfund taxes that help pay for the cleanup of high risk hazardous waste sites. This would include an excise tax of 9.7 cents per barrel on crude oil and imported petroleum products and an excise tax on other hazardous chemicals.

Repeal the “last in, first out” accounting technique, which allows inventories to be valued at the most recent price paid when calculating net profit and taxable revenue. This accounting method is a big benefit for businesses with inventories that have increased in value, but it doesn’t conform with international accounting standards.

Obama’s plan spared so-called master limited partnerships, business structures that are used by many Houston energy companies, especially pipeline operators.

It’s safe to say that the oil and gas tax hikes (or loophole closings) are DOA, as has been the case in every previous year of the Obama presidency. Two reasons: They are a non-starter in the Republican-controlled House, and they face unwavering opposition from energy-state Democrats in the Democratic-controlled Senate.

Still, the administration sees it as both a matter of principle (“fairness”) and a matter of fiscal responsibility (additional revenue to rein in the federal deficit).

Senior administration officials told reporters that the budget blueprint includes $4.3 trillion in deficit reduction and two dollars in spending restraint for each dollar in additional tax revenue. (Republicans quibble with all of these numbers.)

White House officials say they are willing to compromise with House Republicans, but only if the GOP agrees to higher taxes.

“If they refuse to include revenues in any deal, there won’t be any deal,” a senior administration official said yesterday.